A Sobering Reality: Venezuela’s Beer Shortage Highlights Economic Crisis
Though the crisis happily has been averted, at least for the moment, Venezuela’s beer woes are a manifestation of the larger and far more serious economic and social issues confronting the country.
Venezuela is running out of beer. The flow of raw ingredients—primarily hops, malted barley, and yeast, for those not involved in the homebrew movement—has dwindled, forcing Venezuelan breweries, including the well-known Polar, to shut down plants. At its worst, analysts predicted that the situation could become quite dire for beer lovers: approximately 80 percent of Venezuela’s beer supply was expected to be drained by August 3. Happily, however, Venezuela’s Chamber for Beer Producers (CAVEFACE) announced on July 30 that brewers have been able to keep the taps open—at least temporarily. Though the crisis has been averted, at least for the moment, these beer woes are a manifestation of the larger and far more serious economic and social issues confronting Venezuela.
Venezuela’s economic mismanagement lies at the heart of the beer crisis. Brewers struggled to get their hands on the necessary ingredients not due to a global shortage or natural disaster, like a drought, but due to the Venezuelan government’s harsh currency controls. When local companies, including breweries, want to import goods, such as barley, they must buy U.S. dollars directly from the government to pay for these materials. The recent drop in oil prices has made these dollars a scarce commodity, and as a result the government does not have enough dollars to sell—especially to companies that are not state-owned—making it difficult for companies to import the supplies they need to stay in business. And it certainly did not help that many Venezuelan breweries were already over $200 million in debt to international suppliers. Beer is just the latest casualty of this economic disaster: toilet paper, cooking oil, shampoo, and medical supplies are increasingly scarce, as are other consumer goods across a variety of sectors.
Where there is an economic crisis, there is frequently also social unrest. The International Crisis Group recently released a report warning of a possible “humanitarian crisis” brewing within the country, which could lead to increased crime rates, disease, and even mass migration as Venezuelans cross into neighboring countries like Brazil and Columbia. The beer industry troubles alone may cost over 400,000 jobs, and Polar employees staged protests when the brewery closed two of its six facilities. Venezuelan President Nicolas Maduro’s government—eager to deflect blame—accused Empresas Polar, Polar beer’s parent company, of “sabotaging” the country’s economy by hoarding goods and purposefully creating shortages, charges Polar has denied; Polar instead blamed the government’s socialist economic policy. When Fray Roa, the spokesman for the National Association of Liquor Store Owners, warned of the devastating consequences the shortage in raw materials would cause, he was mysteriously detained.
As this infighting between government and industry continues and the private sector struggles to stay afloat, it seems the country may be headed towards defaulting on its international debts. The bolivar’s value has dropped rapidly and hyperinflation is a real fear, hindering Venezuela’s ability to pay the approximately $5 billion in bond payments due at the end of 2015 and the $10 billion due in 2016. As if all that is not enough, Maduro will face elections in early December, and has already made waves abroad by refusing to let certain members of his opposition run for office, rejecting foreign election monitors, and accusing the US of plotting to destroy his administration. Clearly, Venezuela is nearing a breaking point, despite the government’s efforts to maintain control.
The beer shortage may have grabbed headlines abroad, but it should be considered a window into the deeper, systemic issues within Venezuela, rather than a catchy anecdote. The collapse of oil prices, convoluted system of currency controls, scarcity of medicine and food, and rampant corruption will take time to sort out, and while the December 6 elections hold some promise, Venezuela’s problems will not be solved overnight. Would the opposition party fare any better at rebuilding the economy than the current administration? Only time will tell, though the international community can—and should—continue to push for fair elections. Maduro has proven that he is unwilling to shoulder any of the blame for the ongoing troubles, and if he continues entirely unchecked there seems to be little chance that the situation will improve. Both a default and the humanitarian crisis suggested by the International Crisis Group remain very real possibilities—not to mention the looming shutdown of Venezuela’s taps.
Michelle Bovée is an account executive at a business development firm in the Washington, DC metro area and a graduate of the London School of Economics MSc International Relations program. She is a staff writer for Charged Affairs, where her focus areas include current events and international economics.
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